BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 583
Author: Baca (D)
Amended: 7/7/99
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE : 4-0, 4/12/99
AYES: Ortiz, Baca, Karnette, Lewis
NOT VOTING: Haynes
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 37-0, 5/13/99
AYES: Alarcon, Alpert, Baca, Bowen, Brulte, Burton,
Chesbro, Costa, Dunn, Escutia, Figueroa, Hayden, Haynes,
Hughes, Johannessen, Johnson, Johnston, Karnette, Kelley,
Knight, Leslie, Lewis, McPherson, Monteith, Morrow,
Mountjoy, Murray, O'Connell, Peace, Polanco, Poochigian,
Rainey, Schiff, Sher, Solis, Vasconcellos, Wright
NOT VOTING: Ortiz, Perata, Speier
ASSEMBLY FLOOR : 77-0, 8/26/99 - See last page for vote
SUBJECT : Public Employees' Retirement System
SOURCE : Public Employees' Board of Administration
Laborer's International Union of North America
DIGEST : This bill (1) authorizes the Public Employees'
Retirement System (PERS) to establish "risk pools" for
contracting local agencies and school districts, and (2)
allows Public Employees' Retirement System members to
CONTINUED
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participate in employer-sponsored supplemental defined
benefit plans.
Assembly Amendments (1)add provisions to authorize the
Public Employees' Retirement System to establish "Risk
Pools" for contracting local agencies and school districts,
and (2) make clarifying changes.
ANALYSIS :
I. Risk Pools
Existing law requires Public Employees' Retirement System
(PERS) contracting local agencies to establish individual
defined benefit plans, with the employer contribution rate
based upon the agency's assets and liabilities. There are
approximately 1,800 separate public agency plans, including
about 400 with fewer than 20 employees. For small local
agencies, the required contribution rate can vary
considerably, based on the incidence of claims. A single
disability claim in a five-person agency, for example,
would result in one-fifth of the agency's workforce drawing
disability benefit, which could cause the employer
contribution rate to skyrocket.
This bill authorizes the PERS Board to establish optional
"risk pools" in which local public agencies and school
districts could choose to pool their assets and liabilities
with entities offering similar packages of benefits. Risk
pooling allows the liabilities of benefit plans to more
closely reflect statistical norms of the general
population, which adds predictability to employer
contribution rates of small local agencies.
II. Supplemental Benefit Plans
Existing Public Employees' Retirement System (PERS) law
generally prohibits PERS membership if a person already
participates in a retirement or pension system that is
supported by public funds.
However, existing PERS law does not prohibit membership in
certain supplemental retirement programs, such as:
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1.A deferred compensation plan.
2.A money purchase plan (a type of defined contribution
plan where the mandatory employer contribution may be
combined with an employee contribution, not to exceed a
total of 25% of the employee's taxable income).
3.401(K) plan meeting the requirements of federal law.
This bill specifically permits PERS members to participate
in supplemental defined benefit plans that meet the
requirements of Section 401(a) of Title 26 of the Untied
States Code, providing that:
1.The PERS program must be considered to be primary.
2.The employer must have received a ruling from the
Internal Revenue Service that the supplemental defined
benefit plan is qualified under federal tax law.
3.The PERS benefits cannot be impaired in any way as a
result of participation in both plans.
4.In the event that the combined benefits (PERS and
supplemental plan) exceed the federal income limits, the
benefits of the supplemental plan must be reduced.
Comments
PERS state that some plans, including one sponsored by the
Labors' International Union of North America (LIUNA), have
already been negotiated with PERS local agencies to cover
employees. LIUNA argues that their plans meets the
existing exemptions.
The purpose of this bill is to clarify the status of these
supplemental defined benefit plans in the PERS law.
PERS also states that this bill:
1.Does not require any employer, employee, or retirement
plan to do anything.
2.Clarifies that PERS employers may offer this kind of
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supplemental plan without jeopardizing their employees'
membership in PERS.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Assembly Appropriations Committee
analysis, PERs wuld incur absorbable administrative costs
to establish risk pools, which in turn may result in
administrative cost savings, to the extent that there would
be fewer local retirement plans for PERS to conduct
actuarial reviews of each year.
SUPPORT : (Verified 8/27/99)
Public Employees' Retirement System Board of Administration
(co-source)
Laborers' International Union of North America (co-source)
Southern California District Council of Laborers
California State Council of Laborers
California Faculty Association
California Labor Federation, AFL-CIO
California Independent Public Employees Council
California School Employees Association
ASSEMBLY FLOOR :
AYES: Aanestad, Ackerman, Alquist, Aroner, Ashburn,
Baldwin, Bates, Battin, Bock, Brewer, Briggs, Calderon,
Campbell, Cardenas, Cardoza, Cedillo, Corbett, Correa,
Cox, Cunneen, Davis, Dickerson, Ducheny, Dutra,
Firebaugh, Floyd, Frusetta, Gallegos, Granlund, Havice,
Hertzberg, Honda, House, Jackson, Kaloogian, Keeley,
Knox, Kuehl, Leach, Lempert, Leonard, Longville,
Lowenthal, Machado, Maddox, Maldonado, Margett, Mazzoni,
McClintock, Migden, Nakano, Olberg, Oller, Robert
Pacheco, Rod Pacheco, Papan, Pescetti, Reyes, Romero,
Runner, Scott, Shelley, Soto, Steinberg, Strickland,
Strom-Martin, Thompson, Thomson, Torlakson, Vincent,
Washington, Wayne, Wiggins, Wildman, Wright, Zettel,
Villaraigosa
NOT VOTING: Baugh, Florez, Wesson
TSM:cm 8/27/99 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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